MMM Kenya, a local affiliate of MMM Global, is in a limbo after the death of its founder Sergey Mavrodi. Mavrodi, who had been operating the dubious money doubling scheme online, reportedly passed away after a heart attack last Sunday, leaving thousands of his victims with worthless “mavros” and hundreds of millions of shillings lost.
Although the MMM pyramid scheme had already crumbled in countries such as Nigeria and South Africa, MMM Kenya continued its operations enticing thousands of people to pay money to strangers they interacted with online.
The Man: Sergey Mavrodi
Mavrodi was a renowned Russian fraudster who was found guilty in 2007 of swindling money from 10,000 Russian investors who lost more than $4 million and was sentenced to 4.5 years in prison. After his release in 2011, the MMM Ponzi scheme resurfaced only that now Mavrodi’s target market became the African continent. In 2015, MMM South Africa was established, promising participants a 30 percent return on their investment and bitcoin became the payment option of choice for the scheme.
The Ponzi scheme would later in 2016 spread to other African countries such as Kenya, Ghana, Nigeria and Zimbabwe.
Media reports say that the 62-year old died of a heart attack after a short complaint of chest pain and weakness. Moskovsky Komsomolets, a Moscow newspaper reported that “Mavrodi was hospitalised in the 67th City Hospital. He could not be saved – he died this morning.”
According to a statement on their website, MMM Kenya administrators said “they have put the Internet-based infrastructure on “pause” mode, leaving all those in possession of “mavros” – the pseudo-currency sold by Mavrodi – unable to do anything with it. As such, those with money in the pyramid scheme will be unable to withdraw anything. The statement went on to say: “In the near future, the administration will take a decision concerning MMM’s future and report on it officially.”
MMM Kenya Membership
The common question that was asked of any new recruit interested in the pyramid scheme was: “How much money do you need to be absolutely happy?” MMM Kenya has recruiting agents who would then entice the new members into meetings and ask them to sign up so as to get financial assistance from other new members. The new recruits would then be asked to donate money to the “needy” – the older members – and, in turn, they would earn points in MMM’s (fictitious) digital currency. In the scheme, the more a person gave or the more an old member convinced new members to join, the more points – known as mavros – they earned which they could end up withdrawing as money.
According to the Daily Nation, those investing in the Ponzi scheme were also promised a 30 percent return on their investment and higher returns if they helped members within the scheme that needed financial aid. And the only way that MMM Kenya would survive is if more members signed up. If there is an imbalance between the number of new recruits and those seeking financial aid, the scheme would collapse. This was the case in Nigeria when the number of those seeking help surpassed that of those donating.
The indefinite “pause” of the MMM Kenya operations comes two months after Patrick Njoroge, the Central Bank of Kenya Governor issued a warning to those investing in digital currencies like bitcoin and Mavrodi’s Mavros that it was a bubble and they should be ready to lose all their money.
The CBK notwithstanding, the operations of MMM in Kenya continued with thousands falling victim to the scheme with a promise of getting high returns on their investment. As Kenyans who have invested in the pyramid scheme await for a way forward from the company, it is only a matter of time before they can start counting their losses.
The Golix Controversy: Has the African Exchange “Exit Scammed” Users And Investors?
Prior to May 2018, Zimbabwe-based bitcoin exchange Golix was bullish about its future prospects. The startup claimed it had raised $32 million from a token sale and had plans to set up operations in several other African countries. However, more than a year later, the digital asset exchange has had a reversal of fortunes and, after its forced shutdown in Zimbabwe, some of Golix’s former clients are struggling to get their funds reimbursed despite promises and frantic efforts to recover these.
Former Golix users now point to possible embezzlement of funds by Golix executives while one investor in the startup blames the hostile operating environment as the reason for the company’s general failure.
Tawanda Kembo was the chief executive officer (CEO) of Golix when it was shut down in Zimbabwe. Bitcoin Africa reached out to him to get his side of the story but he had not responded to our questions at the time of publishing.
However, Bitcoin Africa still managed to contact Taurai Chinyamakubvu, an individual who says he was an investor in the company. Chinyamakubvu claimed he is not aware if client funds had been reimbursed or not since he was not involved in the day to day affairs of the crypto startup.
“On funds, you can check with the CEO, he was doing the day to day stuff. I was just an investor,” Chinyamakubvu pushed back when asked if they had recovered client funds that were reportedly locked in banks.
In May 2018, Zimbabwe’s central bank issued a directive that forbade financial institutions from dealing with crypto exchanges. According to Golix, this led to banks blocking access to client funds and the company from using the financial system.
Central Bank Defiance And Crypto Adoption
When asked why Golix had not resumed operations following a High Court ruling that set aside the central bank order, Chinyamakubvu suggested that Golix’s Zimbabwe operations remain hamstrung by the central bank’s reluctance to lift the order.
“They (Reserve Bank of Zimbabwe) did not lift the order they sent to banks. So no bank wants to defy a regulator. But that said, you muddy the water once, that’s enough to change its colour for a while,” he stated.
Chinyamakubvu is convinced that the central bank’s apparent defiance of a court ruling continues to hinder the growth of the crypto space in a country that should be embracing privately-issued cryptocurrencies.
Zimbabwe has been plagued by hyperinflation for the past two decades, which is spurred on by a volatile fiat currency. Critics point to the central bank’s penchant for unrestrained printing of money as the main cause of the country’s currency troubles.
The Golix investor called the central bank’s decision to shut down the crypto exchange ‘retrogressive’.
Ironically, the Reserve Bank of Zimbabwe recently announced the setting up of a committee to study financial technologies such as bitcoin. The regulator now says it wants to come up with what it calls a “National Fintech Strategy.”
Disappeared Client Funds
Bitcoin Africa also reached out to former Golix clients as it tried to establish what happened with their funds. Some did not respond but a few did – although they requested anonymity. One lady, in particular, expressed exasperation with the way Golix has been handling the issue.
“I do not know about others but I still have not been reimbursed. Tawanda (CEO of Golix) has made several promises to settle but nothing has happened,” claimed the lady who preferred to remain anonymous.
She further explained that currently there is nothing noteworthy happening but promised to reveal more details as and when they become known.
Kembo on the Run?
Following the central bank decision to stifle cryptocurrency trading, some crypto traders have gone on to create informal trading platforms using social media networks like Whatsapp, Telegram, and Facebook.
Bitcoin Africa was also able to get access to one such Whatsapp chat group feed wherein clients are discussing strategies of recovering funds from Golix. In a discussion that occurred in July 2019, one member of the group asks fellow members to furnish her with information that includes Kembo’s personal identification number or even a vehicle registration number. This could then be used to help a hired tracing agent to locate him.
It is apparent from the discussions that Kembo has made several promises – including re-payment plans – to reimburse but nothing has happened to date. Adding intrigue to the controversy, this client claims Tawanda told them he had lost the key to the cold storage wallet. Thus, he could not access the bitcoin.
Keys to a crypto wallet are essentially a passcode that grants access to funds and without them, the funds are lost and cannot be recovered.
In the meantime, another post on the same thread suggests that Chinyamakubvu was being disingenuous when he expressed ignorance about the status of client funds. In the post, another member insists that prior to the central bank order, Golix was asked to remove all funds before accounts were closed.
The anonymous member was referring to a part of the central bank circular to banks which states the following:
“Exit any existing relationships with virtual currency exchanges within sixty days of the date of this Circular and proceed to liquidate and restitute existing account balances.”
This central bank circular was issued on May 11, 2018, and Golix seemingly had enough time to exit from banks as well as to reimburse clients.
No Consumer Protection
The anonymous member suggests that since this did not happen, the issue should now be treated as a criminal case.
It is apparent from the rest of the discussion that members were aware of the risks involved with crypto businesses. The central bank had warned the public of risks of dealing with cryptocurrencies and associated businesses prior to Golix’s demise.
Zimbabwe does not have consumer protection laws that specifically deal cryptocurrencies and those dealing with such digital currencies do so at own risk, a point clearly articulated by the central bank circular. Perhaps it is with this in mind that some Golix clients are now pursuing fraud charges against Golix executives.
Lack of legal protection is another factor inhibiting the widespread adoption of cryptocurrencies but that may yet change as the central bank is now having a change of heart.
Bitcoin Africa will continue to follow the events surrounding the alleged exit scam of Golix and update our readers when new information surfaces.
Alleged Con Man Taken to Court in Kenya Over Fake Bitcoin Deal
A man is reportedly facing charges in a Nairobi court after allegedly swindling an accountant out of 375,000 Kenyan shillings (KES) in a fake bitcoin deal. The accused, Patrick Kamau, allegedly committed the fraud on several dates between December 2018 and May 2019.
Bitcoin Investment Deal Goes Sour
Kamau reportedly promised to open a forex trading account for the complainant and invest in forex bitcoin through BNB Forex. Benjamin Mugoya entered into the deal with the hope of making crypto trading profits after a friend introduced him to Kamau. The accused posed as a sales representative for BNB Forex in Kenya.
To open the forex trading account, Kamau asked Mugoya to wire KES400,000 to his bank account. However, after receiving a total payment of KES375,000 on May 22, Kamau switched off his phone.
In addition to this payment, Mugoya had sent Kamau KES50,000 in two installments in December 2018 and January 2019.
This is not the first bitcoin-related case that has been heard in a Nairobi court. In 2017, three bitcoin traders were charged with allegedly stealing KES10.2 million from I&M bank and Mpesa. The case involved a purchase of bitcoin from the traders using stolen money.
The case against Kamau has been scheduled for 22 February 2020. The accused was released on a cash bail of KES150,000 or a bond of KES200,000.
Unregulated Crypto Space
Mugoya could be one of many victims that have fallen prey to fake bitcoin investments despite the Central Bank of Kenya’s warning against investing in bitcoin.
The Bank’s Governor, Patrick Njoroge, has been vocal about the risks associated with cryptocurrencies such as fraud. In 2018, the Governor ordered Kenyan banks to refrain from making crypto transactions or engaging with entities transacting in virtual currencies.
The unregulated crypto space in Kenya means that victims of crypto fraud are unprotected, thereby, preventing them from recovering their funds. However, with sufficient evidence, Mugoya could obtain justice from the Kenyan court system.
UNICEF to Accept Cryptocurrency Donations Through Newly-Created Fund
The United Nations Children’s Fund (UNICEF) has rolled out a cryptocurrency fund that will enable the organisation to receive, hold, and distribute donations in bitcoin and ether. UNICEF will use cryptocurrencies to support open-source technology assisting children and young people across the globe.
The Cryptocurrency Fund
Contributions to the cryptocurrency fund will be held in the cryptocurrency of donation and will be disbursed in the same cryptocurrency.
UNICEF’s Executive Director Henrietta Fore stated: “This is a new and exciting venture for UNICEF. If digital economies and currencies have the potential to shape the lives of the coming generations, it is important that we explore the opportunities they offer. That is why the creation of our Cryptocurrency Fund is a significant and welcome step forward in humanitarian and development work.”
UNICEF is the first United Nations Organisation to establish a cryptocurrency fund. The fund is part of the organisation’s current work with blockchain technology. UNICEF and WFP are the leaders of the UN Innovation Network, a body that researches the impact of emerging technologies, such as the blockchain.
First Crypto Contributions
The first crypto contributions to the newly-created cryptocurrency fund will come from the Ethereum Foundation. The contributions will profit grantees of the UNICEF Innovation Fund and the GIGA initiative project that connects schools with the internet.
Aya Miyaguchi, Executive Director of the Ethereum Foundation said: “The Ethereum Foundation is excited to demonstrate the power of what Ethereum and blockchain technology can do for communities around the world. Together with UNICEF, we are taking action with the Crypto Fund to improve access to basic needs, rights, and resources. We aim to support the research and development of the Ethereum platform, and to grow the community of those that benefit from a technology that will better countless lives and industries in the years to come.”
The grantees of the UNICEF Innovation Fund that will receive the initial funds are Prescrypto, Utopixar, and Atix Labs. Prescrypto offers prescription tracking while Utopixar leverages blockchain technology to solve social and environmental challenges. Atix Labs is a blockchain solutions company.
The Ethereum Foundation will make the first contribution through UNICEF’s French National Committee. Other UNICEF National Committees that accept crypto are the US, New Zealand, and Australia.
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